Buyers: How to Survive a Seller’s Market
As someone assisting a large number of buyer clients, this market reminds me of being in Phoenix, Arizona, during the housing rush. I’m seeing multiple showings during the same time slot, multiple offers (my record is 17 for one house), homes selling in 24-48 hours of listing, and buyers waiving a surprising number of contingencies to compete more successfully. Here is some of the advice that I offer all of my buyers. If you’d like to learn more, please let me know. I’ll be happy to help.
As plenty of news sources report (and I’ve written about a few of these too), this is an excellent time to sell your property! Sellers, after eight years of being beaten up by those pesky buyer with their outrageous demands and low offers, you are back in the driver’s seat. You’re going to enjoy buyer fears over rising interest rates, the improving economy, and a scarcity of quality properties on the market. Congratulations!
Unfortunately, every side has two coins. Buyers, this is no longer 2010 and the bottom-of-the-market ship has sailed. However, not all is lost! In the Investor Weekend section of the Wall Street Journal, AnnaMaria Andriotis gives some hints about how to survive this market.
I’ll add some of my own advice based on what I’m seeing in the field.
You are in competition. You are no longer the only buyer in town and you must compete to win the best properties. Sellers get to choose the pick of the litter when it comes to offers. Tips? Purchase price means a lot, but so do terms. Some sellers need to move by a certain date, want their kids to be able to finish out the school year, or will even compare numbers in financing contingencies. Do you really need to do all of those tests, like mold, radon, or lead paint? Decide what’s absolutely necessary versus desirable. Also, don’t succumb to auction fever. In a multiple counter situation, decide what the house is worth and stick to your price.
Some sellers don’t watch the bottom line. Use this to your advantage. Some (not all) sellers pay an inordinate amount of attention to the offer price and less attention to the rest of the offer. For example, a property is worth $500,000 but needs $10,000 in repairs. You could offer $490,000. Instead, you might try offering $500,000 and request the repairs be done prior to close. You can also sneak in home warranties, seller contributions toward closing costs and funding fees, etc. Yes, you will be paying for this over the life of the loan. However, it may be the only way to win a very desirable property.
Have an imagination. Something that looks horrendous today doesn’t have to remain horrendous tomorrow! Let’s say that you want a kitchen straight out of a Pottery Barn® catalog. However, you find that properties with redone kitchens have tough competition and sell for more than you prefer. The solution is to find a property with a serviceable kitchen and to have a renovator create a quote to renovate the kitchen to your specifications! Or, for the truly brave, buy a property that is not move-in ready and have it renovated starting the day of closing. This also works with bathrooms, master suites, garages and outbuildings, etc.
Be ready. The days of finding anything quality through manual searches is done. Trulia®, Zillow®, and other search sites have a 24+ hour lag; they don’t automatically post new listings for up to 24 hours after the property first goes live. Some brokerages also refuse to have their listings uploaded to third-party sites. This means that agents working with a real estate broker have a distinct competitive advantage over the do-it-yourself crowd. Remember, the best homes are selling in 24-48 hours and some homes never even hit public third-party sites. You can’t afford this 24+ hour lag or not to know everything on the market! Have your agent create an auto-update so you know the minute a new property goes on market. Be ready to rush to see it and to draft an offer. Have your pre-approval letter or proof of funds in hand. In hot markets, you may not have a second chance at any property you see. Insist that your agent carry all of the papers to make an offer with them during showings. Don’t be afraid to call a halt to showings to draft an offer if you see the property. Your agent can always apologize later to the showings you missed because you were locking down something perfect.
One final word of caution- temporary vs. lasting price increases. Andriotis notes that “…Fitch Ratings, a credit-rating firm, said that prices in many metropolitan areas are being driven up more by limited inventory than by a strong economy. … With supply limited, small increases in demand can have outsized impacts on price.” Is the local economy strong? Are people moving in? Are jobs and wages growing? In areas with available land, are builders building new houses? Be careful and look at local economic data if you expect to leave the area in seven or fewer years.
Buyers, would you like a friend in the market? I’m happy to discuss strategies and options to make your home search successful. Please let me know what you need and I’ll be happy to help.
Sellers, do you want to take advantage of this awesome market? I can show you techniques which will get the largest number of potential buyers into your home. These techniques also create more demand and a higher selling price. It will be my pleasure to show you the most profitable way to sell your property.